Speaking at a conference in Berlin, Russian Economic Development
Minister Alexei Ulyukayev said that it was clear that Ukraine’s GDP would
contract. “It is clear that the country's foreign trade will also suffer. That
will obviously have an impact on the Russian companies that operate in
Ukraine," Ulyukayev said.

Russia’s association with Ukraine in the eyes of foreign
investor has also affected capital outflow in Russia itself. The net outflow of
funds working in Russia reached $116 million dollars in the week of Feb. 12-19,
up from $53 million the week before. Market players blame the situation on the
threat of a "significant deterioration of the investment climate" due
to problems in a “large neighboring state” as well as the Ukrainian exposure of
Russian businesses.

Business as usual?

Two of Russia’s big three mobile operators, MTS and
Vimpelcom, have operations in Ukraine. They have reported peak loads on their
networks due to record volumes of voice traffic in parts of the country. On the
whole, however, they report business as usual. The only serious incident to the
telecoms network happened in Kiev, where a major blaze in a building on
Independence Square (Maidan), the epicenter of the protests, damaged a $50,000
mobile base station. Both MTS and Vimpelcom have closed their retail outlets in
central Kiev until the crisis is over.

The Russian search giant Yandex also says there has been
no disruption to its operations, even though its Ukrainian headquarters is in
central Kiev. The company allowed its staff to worked from home for several
days while the Kiev subway system was down. Yandex has said, however, that
there has been a major shift in its traffic patterns, from general search
traffic to search queries on the latest news.

Several Russian steel and mining giants, including Evraz,
Mechel, and Severstal, have major industrial assets in Ukraine. Evraz said that
its operations in Ukraine have not been affected by the political situation,
but added in a statement "there may be some difficulties with payments
from partners and customers." Mechel has declined to comment, but sources
say that political instability has forced the company to suspend talks about
selling one of its facilities in Ukraine.

Russian oil companies say their operations in Ukraine
remain unaffected by the crisis. Rosneft has about 150 gas stations in Ukraine
and Lukoil has several dozen. Both companies note that their outlets are
operating at usual.

Gas monopoly Gazprom has said there have been no problems
with gas transit via Ukraine, but the company declined to comment on the issue
of Ukrainian debt for gas supplies. The latest payment from Ukraine arrived on
Feb. 17, when Kiev paid $1.28 billion dollars to clear half of the outstanding
debt for 2013 and $191 million dollars to pay for January gas. Part of that
payment was made thanks to the loan from Russia that set off the current
crisis; Ukraine received the first $3 billion tranche in December. Russia was
prepared to provide another $2 billion by purchasing Ukrainian bonds, but those
plans are now on hold until the political situation stabilizes. The price of
gas has been a regular touchpoint between Russia and Ukraine.

Banks cautious

Of all the Russian companies operating in Ukraine, banks
have so far been the most affected. Many have been forced to impose
restrictions on various banking operations and to limit daily cash withdrawals
through ATMs. They say the limits are in place to allow all customers to make
withdrawals and avoid a run on the banks.

Banks have also become more cautious about lending. German
Gref, head of Russia’s retail banking giant Sberbank, announced on Friday that
while the bank would not be extending credit to new personal and corporate
customers, existing customers remain unaffected. The bank
said in a statement that the restrictions will be lifted “as soon as the
situation on the financial market is stabilized.”

Western banks are also cautious about the developments in
Ukraine. The European Investment Bank, which was founded by the EU member
states, announced on Feb. 19 that it was freezing all operations in Ukraine
until political stability is restored. The European Bank for Reconstruction and
Development (ERBD) has announced that it will not be suspending operations, but
said the focus of its efforts will shift to helping the private sector rather
than state institutions.

Plans for the future

Businessmen are cautious in their outlook for the
situation in Ukraine and in their assessments of the risks of dealing with Ukrainian
partners. None of them, however, has expressed any serious concerns.

Sergei Chemezov, head of the Rostech corporation, said on Saturday that the events in
Ukraine will not have any serious effect on his company, which sources
helicopter engines from the Ukrainian maker Motor Sich. Rostech has long been
planning, however, to substitute the imports from Ukraine with engines made by
its own division, the United Engine Corporation.

Russian Agriculture Minister Nikolai Fedotov said on Feb.
21 that while there has not been any disruption in agricultural trade between
Russia and Ukraine, the threat of such two disruption was very real. He added
that in a certain sense, Russia could even benefit economically from the
instability in Ukraine - for example, by increasing its exports of cereals and
oil-bearing crops. Russia and Ukraine have long been competitors in these
markets.